A Tale of Two Merchants: What Ron Johnson Could Learn From Mr. Selfridge

In the early 20th century Harry Gordon Selfridge revolutionized the department store. In the early 21st century Ron Johnson tried to do it again, and failed. Retail expert Jeffrey Spivock explains why Johnson’s vision for JCPenney wasn’t so crazy after all.

We are going to show the world how to make shopping thrilling.
– Mr. Harry Selfridge (Jeremy Piven) in the first episode of ITV’s Mr. Selfridge

If television had to go back to the 1960s to revisit the heyday of modern advertising, it had to go back even further to recapture the excitement of the department store.

Harry Gordon Selfridge, the brash American entrepreneur who bulldozed his way into the hearts of conservative British shoppers in 1909, is now the unlikely hero of a new show on the U.K.’s ITV. Mr. Selfridge’s key insight was to put everything on display and let people touch, experience and, most importantly, dream.

Johnson was hired by the 110-year-old JCPenney in the fall of 2011, and heralded by some as a messiah whose magic touch could not only save the flailing brand from obscurity, but also reimagine what a department store could be.

Just over 500 days later, on April 8 2013, JCPenney’s board summarily fired Johnson. In their eyes, the man failed to deliver on their fundamental metrics: traffic, sales and revenue.

But the legacy of Johnson’s tenure at JCPenney – both his successes and monumental missteps – holds key insights for marketers, many of which would not have surprised Mr. Selfridge more than a century ago.

Ron Johnson was fired from JCPenney after shoppers reacted negatively to the changes he implemented. Image via thebigstock.com

Change takes time

Once they see what we have done here, there will be no turning back.
– TV’s Mr. Selfridge

Ron Johnson’s tactics at JCPenney were revolutionary and controversial. He almost immediately dismantled all major couponing and discounting, seen by many as the cornerstone of the modern American department store. In what was dubbed “Fair and Square Pricing,” he eschewed “marking up” the original price to discount later.

Instead, he simply reduced all prices by roughly 40 percent and held them there. He also flatly refused the “.99” denomination, delivering prices in rounded-off dollars.

While many of these tactics were considered innovative, critics immediately questioned the brand’s ability to implement them and the suburban customer’s willingness to fundamentally change their approach to shopping.

Historians will look back on Johnson’s tumultuous tenure and likely blame hubris. They will say he wanted too much, too quickly. His belief that high-end brands would not come on board if only some of JCPenney’s 1,100 stores were transformed, led him to rip off the Band-Aid in one single stroke.

The old logo and name (top) has been replaced by the longer and more prestigious title, Hudston’s Bay Company.

In contrast, when former Lane Crawford president Bonnie Brooks was brought in to revolutionize another storied department store, Canada’s Hudson’s Bay (famous for being the oldest incorporated merchandising company in the English-speaking world) in 2008, she saw it as a marathon, not a sprint.

Admittedly, Brooks had the luxury of time, given that her main changes occurred prior to the company’s IPO – so unlike Johnson, she avoided the monthly wrath of impatient shareholders.

But five years later, Hudson’s Bay is still very much in transition. For instance, it only just changed its moniker from the abbreviated “The Bay” back to the more prestigious “Hudson’s Bay.”

Brooks focused her initial innovations on one flagship Toronto location, adding a Canadian Olympic Store, a heritage department and $8,000 handbags, while making subtle changes to the rest of the fleet.

Her slow-building success and her ruthlessness at culling over 900 stale and underperforming brands in favour of smart partnerships with coveted names like TopShop, Ralph Lauren and Burberry have won her the support of the board, who recently entrusted her with overseeing sister company Lord and Taylor in the U.S. as well.

Know the people – inside and out

I want merchandise that people will desire! I want merchandise that people don’t even know they will desire until they see it, right in front of their eyes!
– TV’s Mr. Selfridge

Harry Gordon Selfridge. Image via wikipedia.org.

Like many of the great merchants, Ron Johnson moved on instinct. But in our age of customer analytics and targeted advertising, some of Johnson’s gut feelings were not aligned with what JCPenney’s customers actually wanted – and some testing may have pointed this out.

There is often a huge disconnect between what a customer says they want and what their behaviour shows. While the idea of ‘everyday low prices’ is great in theory, customers, especially American customers, have been trained for generations to love a bargain (in many European countries, where sales and discounts are state-mandated, customers might have been more prepared to embrace Mr. Johnson’s bold vision).

Moreover, given the way retail cycles work, when Johnson ‘killed the coupon’ and enacted his ‘fair and square pricing’, much of the merchandise in question was already in store. So while the final marked price may have been lower under the new scheme, a loyal customer would have seen the same T-shirt under a “40 percent off” sign the previous week.

But perhaps the biggest problem with Johnson’s approach was that he did not inspire an army to help him enact and communicate his vision. The average JCPenney employee likely had trouble explaining their CEO’s vision to customers, especially given the extreme pace at which changes were implemented.

Johnson didn’t have it easy, but he didn’t make it easy on himself either.

Second acts and legacies

The customer is always right.
– A quote credited to the real Mr. Selfridge

It was recently announced that Mr. Selfridge, the television program, was awarded a second season. What might make the real Mr. Selfridge even happier, if he were around today, is that more than 100 years later, his department store continues to build on its founder’s original mantra of “retail as theatre.”

Selfridge’s has launched the largest women’s shoe department in the world (and recently done the same for men). The brand also created a store exterior in Birmingham so architecturally unsettling and alien-like that it has become a tourist destination in its own right.

The super modern Selfridges in Birmingham. Image by Wojtek Gurak via Flickr.

I hope Mr. Johnson’s vision for the department store of the future gets a second chance as well. He might have to start smaller, with one shop or a few, but Ron Johnson’s ideas, as difficult as they were to implement on a grand scale, do have the potential to “show the world how to make shopping thrilling”once again.

The employees’ job isn’t “to explain the CEO’s vision to customers. IT is the company’s job to inspire and teach and empower the employees to DELIVER the vision. And that is not done overnight. Also, if you are trying to deliver a quick, high return to shareholders while doing the above, you are likely to fail. So, was it just the CEO’s vision, or was it the company’s (and its shareholders) as well?

About the Author

Jeffrey Spivock is a Toronto-based marketing strategist, pop culture junkie, volleyball dilettante and travel enthusiast. Now a beauty, retail and consumer expert with MSLGroup Canada, he has previously spearheaded integrated projects for retail brands including Amazon.ca, Gap, H&M and Adidas Originals. Follow him on Twitter at @jeffretail or email him at jeffrey.spivock[at]mslgroup[dot]com.